Maveriq Profile: Blaise Barralet, Analytics Ventures
We recently had the pleasure of sitting down with one of San Diego's most accomplished entrepreneurs. Blaise Barralet is a Founder and Managing Partner at Analytics Ventures. Analytics Ventures is a venture capital firm that creates and invests in technology companies in the San Diego area. They offer expertise in capital, growth, marketing, sales, finance, and a plethora of other business practices. They also have a deep team of entrepreneurship experts with decades of experience in the field. Blaise invited us to his beautiful home in Rancho Santa Fe to talk about his journey and some of the best advice he has for CEOs, startups, and aspiring entrepreneurs. Here's what he had to say.
How did your entrepreneurial journey begin?
It began when I was 12 years old. I have a technical background and started with electronics. I started my first company when I was 20 years old. I've always loved to build stuff, find people that see value in the stuff that I build, and to grow companies. So I've built quite a few companies. The total, I don't even count anymore but it's way over ten companies throughout my life. You learn a lot of stuff. Every new company brings some new challenges. So with my experience I try to build a better company each time. I guess it's kinda working out that way.
Gotcha, and what was the motivating factor for you to become an investor?
When you become an investor it's because you have money. You have money because you have done really well with your business or businesses. Living here in Rancho Santa Fe, I see a lot of people who have money, and you know, all they do after they have this money is play golf or become fat or join some country club… or whatever. They may be on every board of every non-profit and write checks for some cancer research fund… something like that. But to me, the most important factor is giving back and giving back is more than just writing a check. I think giving back is giving something out of you that's going to help others avoid the mistakes you have made. For me particularly that means helping other entrepreneurs. I invest but it's more than just investing. It's helping them deviate away from the same mistakes I made. Trying to teach them something that is a real life experience that I went through. This is what drove me to become an investor.
Thank you for that insight. One thing many first time entrepreneurs struggle with is raising money. What would you suggest they do to overcome that obstacle?
I see lots of investors. Here in this country, the United States of America, I've seen that 99% of CEOs spend the first year or two of their startup raising money. This is wrong! CEOs are meant to run companies, not to raise money! I think the most important part of it is that sales cure all issues. I'm a big fan of making money. When you make money you indirectly raise money, because when investors see that you’re making money they'll want to invest in your company.
A lot of young CEOs have no expertise about either raising or making money, but making money is a lot easier. They may be talking to potential clients and they have, let's say, a product that really brings value to a company. I think they can sell it at any price, even with a huge discount. If they come up with a well thought out sales agreement with a place to sign at the bottom, as an investor this will really incentivise me to write a check. My advice to them is to try to make money before raising it. If you cannot see the value in what you’re doing now, you’re not going to see it in three years. It just doesn't happen that way.
Fair enough. What is your best advice to entrepreneurs for when they pitch their projects to you?
Interesting question. Most entrepreneurs have an issue. It's that they don't give you a feel that they know where they’re going. I think it's very important for people to know their destination. If you do not know where you’re going then you’re not going to get there. There are two advices that I give all the time. The first one is Focus, Focus, Focus. The second one is Low Hanging Fruit. So let me explain:
First is Focus, Focus, Focus. I see so many entrepreneurs that have a "magic" product and they have a bold intent to sell it to the world. It just doesn't work that way! I want to see entrepreneurs focus on one tiny little segment and be the best at it, before they even decide to spread out elsewhere. Once you are the best at something, you will learn a lot of things which will lead you to become the best at something else. If you try to go after the whole world, you may not have the money and infrastructure to do it. Even the big guys that have a lot of money struggle with it.
The second one is Low Hanging Fruit. I see a lot of startups trying to sell products with a very long sales cycle. They may have met somebody who works for a large company and has nothing else to do than waste their time learning about their technology to later develop it in house. However, these sales cycles that are a year or two years reflect a focus on the wrong customer, which is what we call an "elephant" type of customer. So my advice, go where the money is easier to get! Approach smaller customers who are more reactive, which is what we call a “deer” type of customer. There are lots of ways to get money easily, but they are not necessarily what people go after first.
So Focus and Low Hanging Fruit.
Approach smaller customers who are more reactive, which is what we call a "deer" type of customer.
Can you share your thinking on how you identify a company as a great investment opportunity?
Sure. When you invest in companies you want to invest in something new, and at Analytics Ventures what we’re doing is actually creating companies. This is even better than identifying companies. Let me explain the difference to you:
I've seen many owners and entrepreneurs. Somebody has an idea right now. They come meet with you in a week and they want to raise $2 million at a market cap of $10 million. I'm like, "Really? You didn't exist a week ago and now you're worth $10 million? What have you done?" At Analytics Ventures, we don't like that! It doesn't make sense from an investor’s standpoint. So what we'd rather do is create opportunities ourselves. And let me tell you something, there are lots of opportunities here in San Diego. There are so many scientists or employees who work in large companies, but they are not entrepreneurs necessarily. They may be raising a grant if they're a scientist or they want to keep their job, but they have ideas that are fantastic. Nobody is looking for these individuals. So we try to find these people and these people are now finding us. This is good! So I guess Analytics Ventures is doing something good.
So from there we'll approach these people with a business agreement that we’re going to start a company. It's better than identifying companies, it's identifying the opportunities.
That leads to an interesting topic. What are the key ingredients in successfully building these companies once they are under your watch?
When I invest my own money, 85% of my decision is based on who is running the show. You come across a startup that says they are going to sell water. Then three years later, you see that they’re successful and selling everything but water; ice cubes, glasses, straws, you name it. This is what I call pivoting. Successful startups must have the ability to pivot to respond exactly to what their customers want and It takes a fantastic CEO to turn a great idea into a serious and scalable business. So to me, 85% of my decision is based on how good and experienced the CEO is.
The second element that I care about, way above the product, is the money. I think you can have a crappy product and lots of money and you will succeed a lot faster than the other way around. I think a great product and no money is not going to get you anywhere. It's all about sales, sales cure all, and money helps selling for any type of product. Good products may not necessarily sell. I know lots of companies that have had fantastic products, but have not gone anywhere because they don't have the proper funding to market their goods.
I want to throw a bit of a curveball question at you because I like something you mentioned. I'm a strong believer in having a C+ project with an A+ team rather than having an A+ project with a C+ team. How do you find and identify that perfect team?
Well at Analytics Ventures we do that for a living. We set out to build companies and we're locally focused here in San Diego. So we know everyone in town and have an excellent network where people are constantly introduced to us at every level. We have great vendors, great IP attorneys, great corporate attorneys, great banks… the list goes on! We can really help entrepreneurs in getting a lot of things done. It's the same with individual people. People are willing to give us assistance because they know we might have a company in the making and they can get involved at the right time which is the very beginning. So we're really trying to spread the word around San Diego that we have limited partners who are ready to help.
Another thing to keep in mind, startups don't need to always hire great talents full-time. Their costs are always a factor. In my observation, there are two types of talents that I have seen in startups. Here in San Diego, for instance, you may have someone who loves to surf. That person will go surfing in the morning and then take on a $10/hr task at a startup the rest of the day. We need these people in startups, but you can't expect growth with just them. You need to attract the second type which is the elite talent. These are people that have the expertise and the connections to make an impact. These people also represent safety to the investors. When investors invest they want to make sure the money is going to be spent wisely. So we understand that it needs to be done with both types of people and they don't exclusively have to be full-time.
There are lots of talented people in San Diego that have great jobs, but could really enjoy being part of a startup on a weekend or an hourly basis. I encourage startups to find these people. I have a saying.. I say "Get them pregnant.” When you get these people interested in what you’re doing, they're going to continue to give more. Who knows, maybe they'll end up working full-time for you.
Excellent, so entrepreneurs should keep an eye out for talent at all contribution levels. What about unknowns? What are some of the things you wish aspiring entrepreneurs who come to you knew?
That's a good question. Most people don't succeed because they don't know where they’re going. They don't know what they want. I have a little test for when I find an entrepreneur. I tell them, "Let’s say you're in the desert and you find a magic lamp. You rub the lamp and a magic genie comes out and grants you three wishes to make your company successful. What will they be?" You will find that most entrepreneurs can’t even answer that question. They don't know clearly what they want. Or they know something they want but they can't quantify it. They may say, "Oh, I need lots of sales!" Ok, lots of sales is fine, but if you're not being detailed enough about what you want then you're not going to get it.
It's also important to know that those three wishes will change during the life of the company. As the life of the company happens, the things you need are changing constantly. Sometimes every week. So I think it's very important to reassess those needs all the time. You need to know exactly and clearly what you want because there is no genie. At the end of the day, the CEO is the genie! If they do know the three things they really want, I'll ask them how much time a week do they spend in acquiring them. The answers are surprising. Sometimes the CEO will say "I don't know... a day, maybe a week." Just my piece of advice, they should spend 85% of their time going after the three things.
Much of the same applies to employees. I try to get the employees that work in my companies to do one thing a day, but to do it from A to Z. That's very important! If you have ten employees, that's ten things getting done everyday. Then you see how many things you have accomplished in a year and it is phenomenal.
Another problem beginner CEOs have is that they don't know how to choose. As a CEO or entrepreneur, you have to make decisions non-stop. I always think that the best decision is the right one. The second best decision is the wrong one. But the worst decision of all is not to make a decision. I see so many people who are scared to make a decision and their business is not growing because they just don't know what to choose. If you make the wrong decision, rest assure the business will recognize it because it’s a living beast. You can then always go back to making the right decision.
I try to get the employees who work in my companies to do one thing a day, but to do it from A to Z.
Now that we've heard some insight and advice for the entrepreneurs out there, why don't we hear a little more about what's on the horizon for you. What are some of the projects that you are working on for Analytics Ventures?
Well I can't say everything, but I will say that San Diego is a fantastic ground right now. Last year it was voted by Forbes as the #1 City to Start a Business. I had the chance to live for a couple years in Silicon Valley, and while I think Silicon Valley is great, it is very different here in San Diego. We have fantastic schools, we have great existing companies, we have talent that's loyal. People who live here want to stay here. So one of the things we're doing is looking constantly to talk to universities and large companies to explain to them that the only thing that makes a business really work from the start is to find a solution to an existing problem. We have connections in different areas; software companies, app companies, bioinformatics, biotech, meds. The companies we're starting right now are doing those things. We find these talents and most of them probably would not start a company without us.
So now we have companies that specialize in curing cancer. We have another one called CureMetrix that goes after mammograms to detect breast cancer before any human can do it. We have another one called CureMatch that is personalized medicine for people who have cancer. On the technology side, we have a company called ApMetrix that specializes in virtual reality and augmented reality analytics. This technology is going to change the world! We have a few more companies in the works as well, but we don't need to go anywhere to build them up. We stay in San Diego and that's what we focus on 100%.
Can you clearly explain to us what your "Why" is? What is it that makes you so passionate about what you do?
We all know we're going to die at some point. In my opinion, when you stop doing things is when you start to die. I want to stay alive! I think that when you keep doing things it keeps you sharp, alert, and young. You can help other people to enjoy what they do as well. As an older person who has experience and knows ways to build a positive experience, teaching the younger generation keeps you young, energetic, and creative. I see so many people retire and they die within years of retirement. Retiring from working is like quitting smoking cold turkey. That hurts… it's pretty tough! So I think the best thing to do in the case of being an entrepreneur is to continue doing it. Here in San Diego, I'm glad I'm surrounded with a bunch of friends who are also entrepreneurs and want to help Analytics Ventures go to the next level by bringing their expertise into the mix.
So one last question that we think our audience will be really interested in hearing your answer to. How do you decide between shutting down, continuing to fund, or selling a start up?
Decision Making, like I mentioned earlier, is key. The way I make choices if I have to choose one thing out of ten, I feel that it's easier to say “No” to nine things than to say “Yes” to one. So each different stage of a company, whether it's got to be shut down or be further funded, is usually based on numbers and things you can measure. The difference between an entrepreneur and an investor is that the entrepreneur has what I call the "Love Syndrome”. They are in love with their company and can become blind to the reality of their business. Investors’ love comes when they see a potential exit and they are not blind to facts and numbers. At the end everybody wins.
So because we are not falling in love with the company and what it does, it's a lot easier for us to make the right decision and say "No, we're not going fund anymore or we're going to continue to invest because we see the potential.” That's the difference between a CEO and an investor. Their goals are not the same. The CEO wants to grow the company while the investors want a return on their investment.
We want to thank Blaise for being our first Maveriq Profile. By learning from experts like him, we can all become a better version of ourselves. If you are looking to expand your business acumen or grow your technology startup, we strongly encourage you to visit the Analytics Ventures website and learn more about what they can do for you!